Dre California Real Estate Exam Cards

Front 1

A commercial acre is best defined as
A)
an acre after deductions for streets and alleys.
B)
an acre zoned for commercial purposes.
C)
any acre located outside of "R" zoning.
D)
any parcel of 43,560 square feet.

Back 1

A)
an acre after deductions for streets and alleys.The answer is AN ACRE AFTER DEDUCTIONS FOR STREETS AND ALLEYS. A commercial acre is the remainder of an acre of newly subdivided land after deduction of areas devoted to streets, sidewalks, curbs, and the like.

Front 2

The personal revocable and unassignable permission or authority to do one or more acts on the land of another without possessing any interest therein, is the definition of
A)
option.
B)
easement.
C)
encroachment.
D)
license.

Back 2

The answer is LICENSE. A license is defined as a personal revocable and nonassignable permission to enter upon the land of another, but without possessing any interest in the land.

Front 3

Riparian rights differ from littoral rights in which of the following ways?
A)
Riparian rights are associated with water and littoral rights are associated with land
B)
Riparian is a possessory right; littoral is a nonpossessory right
C)
Riparian rights deal with streams and watercourses, while littoral rights deal with oceans and lakes
D)
Litoral is a possessory right; riparian is a nonpossessory right

Back 3

The answer is RIPARIAN RIGHTS DEAL WITH STREAMS AND WATERCOURSES, WHILE LITTORAL RIGHTS DEAL WITH OCEANS AND LAKES. Riparian rights deal with flowing water in a river, stream, or watercourse (a fixed or defined channel). Littoral are rights associated with a body of water such as the sea, or other tidal water (ocean), and lakes.

Front 4

A joint tenancy can be created by deeds conveying undivided interests in which of the following?
A)
By transfer from joint tenants deeding their interests to themselves and others as joint tenants
B)
By transfer from tenants in common deeding to themselves as joint tenants
C)
All of these
D)
By transfer from a wife deeding her separate property to herself and husband as joint tenants

Back 4

The answer is ALL OF THESE. Civil code § 683 enables joint tenancies to be created by (1) simple will or transfer, (2) transfer from sole owner to himself or herself and others, (3) transfer from tenants in common or joint tenants to themselves or to themselves and others, (4) transfer from husband and wife (holding title as community property or otherwise) to themselves or to themselves and others, and (5) transfer to executors of an estate or trust.

Front 5

Police power is a governmental right and would result in
A)
judgments.
B)
the taking of private property for the construction of a highway.
C)
deed restrictions in a subdivision.
D)
zoning standards.

Back 5

The answer is ZONING STANDARDS. The government's police power is the basis for zoning ordinances. The taking of private property is based on the government's rights of eminent domain. Judments result from the power of the judicial branch of government. Deed restrictions are private restrictions.

Front 6

Which of the following is a difference between a mechanic's lien and a judgment lien?
A)
Mechanic's liens are created by statute
B)
Judgment liens are not effective until recorded
C)
Judgment liens are involuntary liens
D)
Mechanic's liens may take priority before the recording date

Back 6

The answer is MECHANIC'S LIENS ARE CREATED BY STATUTE. Whereas mechanics liens are created by statute, judgment liens are created by court decisions. Both may take priority before the recording date. Neither is effective as a lien until recorded. Both are involuntary liens.

Front 7

The customary procedure used to enforce private restrictions on real property is
A)
judgment.
B)
indictment.
C)
desist and refrain order.
D)
injunction.

Back 7

The answer is INJUNCTION. An injunction is a court order restraining or requiring performance by a party to a suit (such as performing acts required by property covenants or refraining from acts restricted by such covenants).

Front 8

A builder submitted building plans that included design specifications and materials for approval. When reviewing these plans, the building inspector determined some of the proposed materials were not in accordance with local building codes but that the use of these materials would not constitute a safety hazard and therefore approved the plans. This is an example of
A)
a permit.
B)
an infraction.
C)
a variance.
D)
an exception.

Back 8

The answer is AN EXCEPTION. This is an example of an exception made by a building inspector. The term "variance" applies to permission to use land for a purpose that does not strictly conform to a zoning restriction. If approved by a building inspector it is not an infraction.

Front 9

Which of the following is considered real property?
A)
A bearing wall
B)
A refrigerator in a mobile home that is not permanently affixed
C)
Trade fixtures that can be removed without any damage to the property
D)
Growing grapes that have been pre-contracted before harvest

Back 9

The answer is A BEARING WALL. A bearing wall in a building is nearly always real property. All other choices are examples of personal property

Front 10

One who takes title in severalty most generally takes title
A)
as sole owner.
B)
in common.
C)
in partnership.
D)
in joint tenancy.

Back 10

The answer is AS SOLE OWNER. The term in “severalty” in real estate means one or sole owner.

Front 11

All of the following are true regarding an appurtenant easement EXCEPT
A)
the dominant tenement must abut the servient tenement at the border.
B)
the easement would run with the land.
C)
the dominant tenement would benefit and the servient tenement would be burdened.
D)
there must be at least two tracts of land under separate ownership.

Back 11

The answer is THE DOMINANT TENEMENT MUST ABUT THE SERVIENT TENEMENT AT THE BORDER. The dominant tenement may have the right to cross over three or four lots in one tract and not all of the servient tenements would be immediately adjacent (contiguous) to the dominant tenement.

Front 12

With regard to local building codes (for example in Los Angeles) vs. the Federal Uniform Building Code, which would prevail?
A)
Local building codes always take precedence over the Federal Uniform Building Code
B)
Whichever has the higher standards of health and safety will prevail
C)
Federal codes always take precedence
D)
The Federal Uniform Building Code applies only to general codes while local codes are more specific

Back 12

The answer is WHICHEVER HAS THE HIGHER STANDARDS OF HEALTH AND SAFETY WILL PREVAIL. Generally, conflicts of law are decided with the health, safety, and general welfare of the people as the highest standard.

Front 13

A one-acre parcel is divided into four equal rectangular lots parallel to each other and each 240 feet in depth. What is the approximate width of each lot?
A)
181.5'
B)
45.4'
C)
280.0'
D)
87.8'

Back 13

The answer is 45.4'
W × L = /A
? × 240' = /43,560 sq. ft. (1 acre)
43,560 / 240 = 181.5 total width
181.5 / 4 = 45.4 ft. per lot

Front 14

A broker was to receive a 6% commission from the sale of a property. His or her salesperson was to receive 45% of the 6% commission. The salesperson received $8,100. What was the selling price of the property?
A)
$300,000
B)
$135,000
C)
$435,000
D)
$40,000

Back 14

The answer is $300,000.

2.7% is salesperson's share (6% gross x 45% split)
2.7% x ?S.P = / $8,100
$8,100 / .027 = $300,000

Front 15

Under authority of a signed exclusive agency listing, Broker Davis diligently advertised for sale the $165,000 home of owner Johnson. Prior to the expiration date of the listing, Johnson sold the home to a friend. Davis was refused payment of any commission whatsoever. Davis is legally entitled to receive from Johnson
A)
one-half commission.
B)
no commission.
C)
full commission.
D)
all expenses incurred in advertising the home.

Back 15

The answer is NO COMMISSION. The broker is entitled to no commission. An exclusive agency listing is one which employs a broker as the sole agent for the seller of real property under the terms of which the broker is entitled to a commission if the property is sold through any other broker, but not if a sale is negotiated by the owner without the services of an agent.

Front 16

An attorney-in-fact is
A)
an attorney or executor of an estate.
B)
all of these.
C)
a principal in a transaction.
D)
a legally competent person acting on behalf of another.

Back 16

The answer is A LEGALLY COMPETENT PERSON ACTING ON BEHALF OF ANOTHER. An attorney-in-fact is one who is authorized by another to perform certain acts for the other under a power of attorney. This power of attorney may be limited to a specific act(s) or may be general in scope.

Front 17

All of the following can sue for specific performance EXCEPT
A)
an Attorney-in-fact acting for the principal.
B)
purchaser of a residential property.
C)
a broker acting as the agent for the principal.
D)
seller of a large tract of land.

Back 17

The answer is A BROKER ACTING AS THE AGENT FOR THE PRINCIPAL. A broker acting as an agent would not likely be able to sue his principal for specific performance because the broker is not a party to his principal's contract.

Front 18

A broker used the following phraseology in his listing contract: "In consideration of the execution of the foregoing, the undersigned broker agrees to use diligence in procuring a purchaser." This is BEST described as
A)
a necessary item in the creation of a unilateral contract.
B)
a necessary element in the creation of a bilateral contract.
C)
an agreement to advertise the property.
D)
superfluous in such contracts.

Back 18

The answer is A NECESSARY ELEMENT IN THE CREATION OF A BILATERAL CONTRACT. In exchange for the seller's promise to pay a commission, the broker promises to use diligence. This mutual exchange of promises makes it a bilateral contract. A unilateral contract requires a promise from only one party and performance from the other.

Front 19

The broker who, with knowledge and written consent of all parties, represents both buyer and seller in a transaction is acting as a
A)
common agent.
B)
dual agent.
C)
dividend agent.
D)
single agent.

Back 19

The answer is DUAL AGENT. A broker who, with knowledge and written consent of all parties, represents both buyer and seller in a transaction is acting as a dual agent.

Front 20

Robert Smith signed an offer and gave the broker his personal check made payable to an escrow company as a deposit. He stipulated that the broker was to hold the check until the seller accepted his offer. The listing agreement specified that any deposit money must be a cashier's check made payable to the seller. Under these circumstances, the broker should
A)
hold the check but do not reveal to the seller that he has accepted the check until the seller accepts the offer.
B)
refuse to accept a deposit that does not conform to the precise terms of the listing.
C)
submit the offer and hold the check.
D)
submit the offer and deposit the check in escrow.

Back 20

The answer is SUBMIT THE OFFER AND HOLD THE CHECK. The Real Estate Law permits a broker to hold the check when he has been ordered to do so by a principal. Since he was not authorized by the seller to accept a personal check, his acceptance of such a check makes him the agent of the buyer for the amount of the check.

Front 21

An agency agreement may be terminated by all of the following EXCEPT
A)
destruction by fire of the property that is subject matter of the agency agreement.
B)
principal's refusal of an offer to purchase presented in the name of a third person.
C)
renunciation of the agreement by the agent.
D)
mutual termination by both the principal and agent prior to the original termination period.

Back 21

The answer is PRINCIPAL'S REFUSAL OF AN OFFER TO PURCHASE PRESENTED IN THE NAME OF A THIRD PERSON. The parties may agree to terminate the agency. An agent may renounce the agency. An agency is terminated by extinction of the subject matter, but a principal's refusal of an offer to purchase does not terminate an agency agreement.

Front 22

Which of the following decided the amount of commission received from the sale of property of a deceased person?
A)
Real Estate board
B)
Court order
C)
Real Estate Commissioner
D)
Administrator or executor of the estate

Back 22

The answer is COURT ORDER. The probate court usually must approve the sale as well as the amount of the commission.

Front 23

Market price is
A)
the price that a property might bring on the open market.
B)
the price an informed seller asks for a property.
C)
the price an informed buyer offers for a property.
D)
the price that a property actually does bring in the open market.

Back 23

The answer is THE PRICE THAT A PROPERTY ACTUALLY DOES BRING IN THE OPEN MARKET. Market price is the price actually paid for the property.

Front 24

Functional obsolescence is a decrease in value due to
A)
being outdated.
B)
wear and tear.
C)
decline in neighborhood.
D)
adverse zoning.

Back 24

The answer is BEING OUTDATED. Functional obsolescence results from inherent defects neither from physical wear and tear nor from external influences.

Front 25

Land value is estimated whenever possible on the basis of
A)
size, location and utility.
B)
purchase price plus the cost of making onsite and offsite improvements.
C)
original cost plus the expense of making it usable.
D)
sale price of comparable sites.

Back 25

The answer is SALE PRICE OF COMPARABLE SITES. Comparable sales data for estimating the value of land would be used "whenever possible"; that is, when there are an adequate number of recent sales in a given area with which to compare.

Front 26

Which of the following reduces the usefulness of the market data approach to appraisal?
A)
Varied differences between financing terms
B)
Rapidly fluctuating economy
C)
Rapid change in financing terms
D)
Positive and negative effects of the comparison approach

Back 26

The answer is RAPIDLY FLUCTUATING ECONOMY. "Rapidly changing economic conditions may limit the usefulness of the sales comparison approach." (AIREA)

Front 27

An appraiser wants to appraise a property using comparable sales prices of similar homes. Adjustments for difference between the home and comparables will be made by adjusting
A)
comparables to the normal.
B)
subject property to the normal.
C)
subject property to the comparables.
D)
comparables to the subject property.

Back 27

The answer is COMPARABLES TO THE SUBJECT PROPERTY. In using the comparison approach, an appraiser "adjusts the comparable properties to the subject property" in order to compensate for the differences.

Front 28

A lot on which there was a structure of no value was appraised for highest and best use. The appraiser would
A)
appraise the value of the land and add the cost of demolition.
B)
ignore the structure's salvage cost.
C)
appraise the value of the land and deduct the cost of demolition.
D)
appraise the value of the land and ignore the cost of demolition.

Back 28

The answer is APPRAISE THE VALUE OF THE LAND AND DEDUCT THE COST OF DEMOLITION. An appraiser making a site valuation would estimate the value of the lot at its highest and best use. A structure that prevents the highest and best use of the site is an under improvement, with negative value. The cost of demolition of such a structure would be deducted from the value of the lot at its highest and best use, to establish present value.

Front 29

If an appraiser was appraising a residence built in 1910, which of the following would he use?
A)
Cost-of-living index that increased from 95 to 128
B)
Today's cost of reproduction
C)
Original cost of materials in 1910
D)
Cost-of-living index of 1910

Back 29

The answer is TODAY'S COST OF REPRODUCTION. The appraiser is interested in today's cost (less depreciation, of course) and value. He or she is not concerned about the original cost or the cost of living index in 1910.

Front 30

An income property showed a value of $800,000 when capitalized at a rate of 9%. A new investor wishing to purchase the same property engaged an appraiser who used a capitalization rate of 12%. According to the appraiser, the value would be:
A)
$800,000
B)
$600,000
C)
$300,000
D)
$224,000

Back 30

The answer is $600,000.
R × V = / I
.09 × $800,000 = / ?
.09 × $800,000 = / $72,000 (net operating income)
.12 × ? = / $72,000


$72,000 / .12 = $600,000

Front 31

In the appraisal of property, the Principle of Substitution would apply to
A)
any of these.
B)
cost approach.
C)
sales comparison approach.
D)
income approach

Back 31

The answer is ANY OF THESE. "Application of this principle is found in each of the three approaches to value which are the basic methodology of the appraisal process" AIREA on appraisal.

Front 32

Which of the following words placed in a promissory note would commit all the borrowers for payment?
A)
Individually
B)
Jointly and severally
C)
Individually and severally
D)
Jointly

Back 32

The answer is JOINTLY AND SEVERALLY. Jointly means the creditor can look to all the signers as a group; severally means he or she can look to any one signer for the entire amount due. Co-signers on a note are jointly and severally liable.

Front 33

An investor purchased an apartment building with a very small down payment and was able to secure financing for the balance. A year later, he sold the property for profit with no increase in his investment. This is an example of
A)
appreciation.
B)
leverage.
C)
inflation.
D)
debt reduction

Back 33

The answer is LEVERAGE. The basic idea of leverage is to use other people's money to finance purchases to realize greater return on your investment. The "increase" is called appreciation.

Front 34

The lower the loan-to-value ratio the higher the
A)
equity interest.
B)
degree of risk.
C)
loan amount.
D)
rate of interest.

Back 34

The answer is EQUITY INTEREST. The difference between the market value and the loan is the owner's equity. If this gap is large the owner has a higher equity interest.

Front 35

In real estate finance, a Beneficiary Statement refers to
A)
amount of profit realized by a lender.
B)
amount of money on heir would inherit.
C)
the amount of principal due on a loan.
D)
terms of a lease.

Back 35

The answer is THE AMOUNT OF PRINCIPAL DUE ON A LOAN. A "Beneficiary's Statement" (a.k.a.: "Bene" Statement) is a statement issued by a lender giving the remaining principal balance and other information concerning the loan. Escrow agents usually write for this statement when an owner wishes to sell, assume, or refinance property.

Front 36

When referring to real estate finance, the term "impounds" most nearly means
A)
penalty.
B)
attachment.
C)
moratorium.
D)
reserves.

Back 36

The answer is RESERVES. In real estate finance, the term "impounds" means reserves, which is a trust type account established by lenders for the accumulation of a borrower's funds to meet periodic payment of taxes and insurance as they become due.

Front 37

From the lender's point of view, the MOST significant factor concerning a purchase money first mortgage is that it takes priority over
A)
any liens against the purchaser at the time of purchase.
B)
real property tax liens.
C)
all liens at the time of sale.
D)
any liens against the seller at the time of sale.

Back 37

The answer is ANY LIENS AGAINST THE PURCHASER AT THE TIME OF PURCHASE. A purchase money lien in real property will take priority over all other liens created against the purchaser, subject to the operation of the recording laws (Civil Code Section 2898).

Front 38

RESPA applies to certain federally-related loans secured by liens on owner-occupied one-to-four-unit dwellings. Which of the following is federally related under RESPA?
A)
A lender whose deposits are insured by a federal agency
B)
A seller taking back a note and deed of trust
C)
None of these
D)
A private lender making a loan

Back 38

The answer is A LENDER WHOSE DEPOSITS ARE INSURED BY A FEDERAL AGENCY. Coverage through RESPA is applicable only if financing is with federally related mortgages. This includes FHA, VA, or other government assisted loans and loans made by institutions with federally insured deposits

Front 39

In accordance with the Real Estate Settlement Procedures Act, the lender must supply the borrower with a Uniform Settlement form
A)
10 days after loan commitment.
B)
at or before closing.
C)
1 day prior to settlement.
D)
3 days prior to settlement.

Back 39

The answer is AT OR BEFORE CLOSING. Under RESPA, the lender must deliver to the borrower a Uniform Settlement Statement at or before settlement. If requested by the borrower the Uniform Settlement Statement may be "inspected" during the business day immediately preceeding the date of settlemen

Front 40

Jones was paying $550 per month to the bank. After the bank deducted interest, $43.85 was applied to the principal. If the outstanding loan balance was $56,500, what was the rate of interest on Jones' loan?
A)
11 ½%
B)
8 ¾%
C)
10 ¾%
D)
9 ½%

Back 40

The answer is 10 ¾%.
(R × T) × P = / I
(R × T) × $56,500 = /$6,073.80 *
10.75% × $56,500 = / $6,073.80

Front 41

In setting up a release schedule under a blanket encumbrance, the beneficiary will usually require a disproportionate amount of money to release a particular lot
A)
to protect the investment as individual lots are sold.
B)
because the best lots usually sell first.
C)
to have better security on the remaining lots.
D)
all of these.

Back 41

The answer is ALL OF THESE. All of the answer choices are legitimate reasons for the release schedule to be out of proportion in favor of the beneficiary

Front 42

A tenant who transfers an entire leasehold interest does so by
A)
transfer.
B)
alienation.
C)
assignment.
D)
sublease.

Back 42

The answer is ASSIGNMENT. Assignment of leasehold means the entire interest is transferred and includes the remaining term and the entire premises. Subleasing is transferring part of the premises or less than the entire term

Front 43

Which of the following is MOST frequently employed to assure title to real property for a grantee?
A)
Warranty deed
B)
Recordation of trust deed
C)
Certificate of title
D)
Title insurance

Back 43

The answer is TITLE INSURANCE. The best protection to assure title to real property is offered by means of a title insurance policy that insures against both "of" record and "off" record risk.

Front 44

A structural pest control report must be delivered to the
A)
buyer.
B)
escrow company.
C)
broker.
D)
lender.

Back 44

The answer is BUYER. When a structural pest control report is a condition of a transfer or the financing of transfer, the transferor, fee owner, or his agent, shall deliver a copy of the report to the transferee (buyer) as soon as practicable before transfer of title. (Civil Code Section 1099)

Front 45

In a certain county, the Documentary Transfer Tax is $.55 per $500, or fraction thereof, of equity transferred. A property sold for $150,000 with $125,000 is being subject to the transfer tax. This tax MOST nearly amounted to
A)
$185.00.
B)
$165.00.
C)
$27.50.
D)
$138.00

Back 45

The answer is $138.00.
$125,000 / $500 = 250
250 × .55 = 137.5
Closest: $138.00

Front 46

Buyer and seller sign escrow instructions that the broker takes to the escrow agent. The escrow agent discovered discrepancies between the escrow instructions and purchase contract. Which of the following is TRUE?
A)
The escrow agent and the broker must resolve the conflict.
B)
The escrow instructions generally prevail because it is the most recent document.
C)
The purchase contract would prevail because it is the original document.
D)
The purchase contract must be redrafted to agree with the escrow instructions.

Back 46

The answer is THE ESCROW INSTRUCTIONS GENERALLY PREVAIL BECAUSE IT IS THE MOST RECENT DOCUMENT. A subsequent document (such as escrow instructions) will prevail over an earlier document (the deposit receipt).

Front 47

Which of the following items would MOST likely be short rated in escrow?
A)
Trust deed
B)
Real estate taxes
C)
Interest
D)
Insurance

Back 47

The answer is INSURANCE. Taxes, and interest in an assumption, are usually prorated in escrow. If the seller's insurance is taken over by the buyer, the seller will be credited proportionately (pro rata) for the portion of the premium the buyer is debited for. When the buyer gets new insurance, the seller's policy will be cancelled and the premium returned to the seller by the insurance company short-rated on a uniform schedule approved by the Insurance Commissioner.

Front 48

All of the following are subject to property taxes EXCEPT
A)
possessory interest of lessees in tax exempt publicly owned properties such as the rights to leases of mineral, oil, and gas interests.
B)
mobile home that is on a permanent foundation.
C)
intangible personal property.
D)
real property in unincorporated areas.

Back 48

The answer is INTANGIBLE PERSONAL PROPERTY. Among the choices given in this question, only intangible personal property is exempt from property taxes.

Front 49

Under the 1911 Street Improvement Act, funds may be raised by the local government, benefiting a subdivider, for all the following purposes EXCEPT
A)
purchase of land for a subdivision.
B)
payment for offsite improvements.
C)
payment for streets, walks, and curbs.
D)
payment for drainage system.

Back 49

The answer is PURCHASE OF LAND FOR A SUBDIVISION. The 1911 Street Improvement Act authorizes the local government to order improvements and pass the expense on to the landowner. This authority cannot be used for the original purchase of the land for a subdivision.

Front 50

A broker advertises in the paper that if a seller lists his property with the broker, the broker would credit the seller with $500 toward the commission to be paid. Also included in the advertisement is the statement that if a prospective buyer brings a copy of the advertisement to the broker, the buyer would be credited in the amount of $50 in escrow that would be applied to the purchase price of the property. Would the broker be subject to the discipline of the Real Estate Commissioner with regard to this advertisement?
A)
The broker can credit the seller but cannot credit the buyer.
B)
The broker can credit the buyer but not the seller.
C)
The broker would be disciplined because his promises to sellers and buyers in the advertisement would constitute payments to unlicensed persons.
D)
The broker may pay the $50 to the seller and to the buyer.

Back 50

The answer is THE BROKER MAY PAY THE $50 TO THE SELLER AND TO THE BUYER. Neither of these promises by the broker would be a violation of law or regulations. Neither the seller nor buyer would be acting as an agent for another in this transaction, so no real estate license would be required of either. The courts have also ruled that disclosed payments by the broker to either the seller or buyer would not be a violation of the Real Estate Settlement Procedures Act (RESPA).

Front 51

If a developer requested backfill, he would be using it for
A)
replacing excavated earth against foundation walls.
B)
driveways.
C)
garden landscaping.
D)
roadways.

Back 51

The answer is REPLACING EXCAVATED EARTH AGAINST FOUNDATION WALLS. Backfill is used in construction to replace excavated earth into a hole or against a structure.

Front 52

Under what circumstances may a broker fill-out the seller's Real Estate Transfer Disclosure Statement?
A)
When instructed to do so by the seller
B)
When the seller is out of town
C)
If authorized by the escrow agent
D)
Never

Back 52

The answer is NEVER. The seller's Real Estate Transfer Disclosure Statement must be completed by the seller.

Front 53

The maximum which may be recovered from the Real Estate Fund (Recovery Account) against one broker is
A)
$10,000.
B)
$20,000.
C)
$100,000.
D)
$40,000.

Back 53

The answer is $100,000. The maximum amount that may be recovered against any licensee from the Real Estate Account shall not exceed $100,000.

Front 54

A contract between two or more persons where one grants the other the right to sell, offer to sell, or exchange goods or services under a marketing plan designed by the grantor is
A)
securities and exchange agreement.
B)
financing agreement.
C)
franchise agreement.
D)
business opportunity

Back 54

The answer is FRANCHISE AGREEMENT. A franchise agreement is set forth in the Franchise Investment law as: A contract between two or more persons where one grants the other the right to sell, offer to sell, or exchange goods or services under a marketing plan designed by the grantor.

Front 55

Harris, an unlicensed person, wanted to purchase 300 acres of land for $85,000 from Stevens, which he or she intended to subdivide in the future. Harris did not have the money for the purchase and convinced a friend, Williams, to purchase the property, and Harris immediately entered into a land sales contract with Williams to purchase the property for $98,000. With respect to the above statements, which of the following is TRUE?
A)
The original purchase and subsequent sales are both valid.
B)
Both transactions would be considered unenforceable.
C)
The original transaction is valid but the subsequent sale is invalid.
D)
The second transaction is illegal.

Back 55

The answer is THE ORIGINAL PURCHASE AND SUBSEQUENT SALE ARE BOTH VALID. The original purchase and subsequent sales are both valid transactions. There is nothing illegal about either transaction.

Front 56

A broker refers all of this clients and customers to West Hills Title Insurance Company. The title company gives the broker a $10 fee for each referral. This practice is
A)
acceptable if the seller is paying for the policy and agrees.
B)
permissible.
C)
forbidden.
D)
acceptable if both buyer and seller are aware that broker is receiving a fee and agree.

Back 56

The answer is FORBIDDEN. The Real Estate Settlement Procedures Act (RESPA) forbids kickbacks, referral fees or any other unearned fees. Referral fees between real estate brokers are permissible but not between real estate agents and unlicensed individuals.

Front 57

Broker Wilson sells a house, and a loan for the buyer is secured through a savings and loan association. Wilson carefully explains all loan costs to the buyer. According to the Real Estate Settlement Procedures Act (RESPA), which of the following is TRUE?
A)
The lender must provide the buyer with an estimate of settlement costs within three days
B)
The lender must provide an estimate of settlement costs to the buyer immediately.
C)
Broker Wilson must provide the buyer with an estimate of settlement costs within one week.
D)
Broker Wilson would not have to provided an estimate of settlement costs to the buyer because he had explained all costs

Back 57

The answer is THE LENDER MUST PROVIDE THE BUYER WITH AN ESTIMATE OF SETTLEMENT COSTS WITHIN THREE DAYS. Under RESPA, the lender must furnish a copy of a Special Information Booklet prescribed by HUD together with a good faith estimate of closing costs to every person from whom the lender receives a written application for a first mortgage loan. The lender shall supply the good faith estimate by delivering or placing it in the mail not later than three business days after the application is received.

Front 58

Under the Truth-in-Lending Law, the three-day right of rescission would begin with which of the following events, if they occurred on different days in the sequence stated?
A)
The date the note is signed
B)
The date the funds are disbursed
C)
The date the disclosure statement is delivered
D)
The date the loan application is made

Back 58

The answer is THE DATE THE NOTE IS SIGNED. The three-day right of rescission that applies to some loans under the federal Truth-in-Lending law begins with the delivery of the disclosure statement or the signing of the promissory note, whichever occurs later.

Front 59

A real estate broker is most likely to receive a commission from both parties when involved in which of the following transactions?
A)
Negotiation of a loan
B)
The selling of a business opportunity
C)
A short-term lease
D)
Tax-free exchange

Back 59

The answer is TAX-FREE EXCHANGE. In an exchange, the broker is usually working for both parties and is most likely to receive a commission from both, if the broker gives them knowledge of the dual agency and gets their consent.

Front 60

Brewer wants to purchase a home, but is denied financing because of an agency's credit report. Brewer has repeatedly tried to get a copy of this report, but the agency refuses to give it to him. Brewer can bring action under the California Civil Code to
A)
do any or all of these.
B)
recover enough money to compensate him for damage to his credit.
C)
recover punitive damages up to $5,000.
D)
recover attorney fees and equitable damages.

Back 60

The answer is DO ANY OR ALL OF THESE. The Consumer Credit Reporting Agencies Act (Civil Code Section 1785.1-35) requires that, upon request, a consumer credit reporting agency must provide a consumer disclosures of the files about that consumer. The Code further specifies penalties of actual damages, punitive damages up to $5,000, and reasonable attorney's fees.

Front 61

To manage properties for the general public, an individual must be a
A)
licensed broker.
B)
nothing is required.
C)
member of a rental service that lists apartments for rent.
D)
certified Property Manager (CPM).

Back 61

The answer is LICENSED BROKER. B&P Code Section 10131 (b) requires a broker's licensee of anyone who, for others and for compensation, "leases or rents" real property or a business opportunity.

Front 62

An agent would be guilty of fraudulent misrepresentation when
A)
the representation was material and inconsistent with fact.
B)
all of these.
C)
the misrepresentation caused the purchaser to enter into a contract.
D)
the misrepresentation was given with knowledge of the trust.

Back 62

The answer is ALL OF THESE. Fraud exists when these three factors are present: when a person misrepresents a material fact, while knowing it is not true, and the purchaser relies thereon in entering into the contract.

Front 63

At the time an owner offers to list his or her property with a broker, the owner makes it a condition that it may not be disclosed that the home is in a slide area. What should the broker do?
A)
The broker should not take the listing.
B)
The broker should recommend that the owner list his property with someone else.
C)
The broker should accept the listing but disclose this information orally to any potential buyers.
D)
The broker should advise the owner to sell the property himself.

Back 63

The answer is THE BROKER SHOULD NOT TAKE THE LISTING. A broker's fiduciary obligation to the client requires obedience to all lawful instructions. It would be a violation of law for the seller or the seller's agent to withhold from a prospective buyer material facts about the property. For the broker to accept a listing under such terms would be to participate in a conspiracy to violate the law. To advise the owner to proceed alone or with someone else would be to advise the owner to violate the law.

Front 64

The objective of the Subdivided Lands Law is to protect purchasers of property in new subdivisions from fraud, misrepresentation, or deceit in the marketing of subdivided lots, parcels, units, and undivided interests in the State of California. An owner of land wants to subdivide his property. What is the minimum number of parcels he would have to create in his new subdivision in order to fall under the Subdivided Lands Law?
A)
four parcels
B)
two parcels
C)
three parcels
D)
five parcel

Back 64

The answer is FIVE PARCELS. The Subdivided Lands Act applies to subdivisions of five or more parcels.

Front 65

A licensee put a blind ad in a local newspaper. A blind ad
A)
does not identify the broker.
B)
does not give the address of the property.
C)
does not disclose the selling price.
D)
does not give the address of the licensee.

Back 65

The answer is DOES NOT IDENTIFY THE BROKER. A "blind ad" is advertising by a licensee who does not disclose in the ad that the property is offered through an agent rather than by a principal. "Does not identify the broker" is not a strictly true statement, but it is the "best" answer given.

Front 66

A broker negotiated a loan for a client. The beneficiary did not specifically instruct the broker to record. The broker is obligated to record
A)
at same time funds are disbursed.
B)
immediately after funds are disbursed.
C)
within 10 days of date funds are disbursed.
D)
before funds are disbursed.

Back 66

The answer is BEFORE FUNDS ARE DISBURSED. Article 5 of the Real Estate Law stipulates the following: Unless a lender has given written authorization to the broker, the broker may not disburse the loan funds until after recording the trust deed securing the note evidencing the loan. If the lender has given the broker authority to release funds prior to recordation, the securing trust deed must be recorded, or delivered to the obligee with a written recommendation for immediate recordation, within ten days, following the disbursement of loan funds.

Front 67

Which of the following might be used as a security device to encumber real property?
A)
Land contract
B)
Any of these
C)
Trust deed
D)
Mortgage

Back 67

The answer is ANY OF THESE. Mortgages and trust deeds are the security for promissory notes. A land contract is also a security device by which the seller retains legal title as security for payment of the purchase price.

Front 68

If the defense of the Statue of Frauds is raised, a licensee would be unable to enforce collection of a commission if she
A)
leases real property for seven months.
B)
sells real property with written authorization.
C)
sells a business opportunity without written authority.
D)
exchanges real property with verbal authorization only.

Back 68

The answer is EXCHANGES REAL PROPERTY WITH VERBAL AUTHORIZATION ONLY. Any contract hiring an agent for selling or exchanging real property must be in writing. The sale of personal property does not require written authorization.

Front 69

Which of the following elements is not necessary in the formation of a contract?
A)
Offer
B)
Consideration
C)
Performance
D)
Acceptance

Back 69

The answer is PERFORMANCE. Offer, acceptance, and consideration are essential in the creation of a contract. Performance is the desired result and not essential in the formation of a contract.

Front 70

Before the purchaser is advised of the seller's acceptance of an offer, the purchaser can withdraw his offer
A)
for any reason.
B)
provided the offer is not irrevocable.
C)
provided the offeree has breached the offer.
D)
provided the offer is breached by the seller.

Back 70

The answer is FOR ANY REASON. An offer may be withdrawn (revoked) by the offeror anytime prior to communication of the acceptance by the offeree regardless of the offeror's reason.

Front 71

The remedy of unlawful detainer is MOST commonly used by the offended
A)
holders of notes in default.
B)
lessors.
C)
grantors.
D)
trustors.

Back 71

The answer is LESSORS. When preceded by a three-day notice, the unlawful detainer is the proper procedure designed by law by which the lessor can have the tenant evicted.

Front 72

A lease based on gross income of the lessee is a
A)
gross lease.
B)
net lease.
C)
percentage lease.
D)
ground lease

Back 72

The answer is PERCENTAGE LEASE. A percentage lease is a lease on property, the rental for which is determined by the amount of business done by the lessee. This is usually a percentage of the gross income plus a provision for a minimum rental payment.

Front 73

A contract signed under duress would be
A)
unenforceable.
B)
voidable.
C)
void.
D)
illegal.

Back 73

The answer is VOIDABLE. When the mutual consent to a contract is induced by fraud, duress, menace, or undue influence, the contract is voidable at the option of the wronged party. While such a contract is unenforceable against that wronged party, the contract is not totally unenforceable because it is enforceable against the other party.

Front 74

Smith signed an offer to buy Brown's property and gave it to the Broker. The broker took it to Brown who signed Smith's offer, giving an unqualified acceptance of it. Before the broker could deliver the accepted offer back to Smith, Smith died of a heart attack. Which of the following is TRUE?
A)
Smith's death worked a revocation of the offer.
B)
Offer is void since the deed could not be delivered to Smith.
C)
Delivery of the offer to the administrator binds Smith's heirs.
D)
The offer and unqualified acceptance constitute a valid contract.

Back 74

The answer is SMITH'S DEATH WORKED A REVOCATION OF THE OFFER. Death of the offeror, prior to the communication of the acceptance, revokes the offer.

Front 75

When an existing contract is replaced by an entirely new contract, this is an act of
A)
hypothecation.
B)
novation.
C)
subrogation.
D)
rescission.

Back 75

The answer is NOVATION. The word novation comes from the Latin words meaning to make new.